Summary
Summary 1.1.4 Production possibility frontiers
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PPF graphs and what they show including opportunity cost and straight line PPF graphs
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Production Possibility Frontiers:◦A PPF demonstrates opportunity cost and the allocation of scarce resources in a diagram
◦Shows possible combination of two goods produced in a certain period of time with a set state
of technology and fully employed resources
◦PPF’s often come with diminishing returns, meaning to move from A-B will have a smaller
opportunity cost than moving from B-C
◦Inward shift indicated economic decline
◦Outward shift indicates economic growth
PPC
PC's
linePPF
straight
be
A resources must
adept at
B equally and
producing goods
Services
Illistratesconstantopportunity TV's
cost with no diminishing
returns
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